European Union: Recent High Court Decision Casts Doubt On Whether EU27 Courts Will Be Able To Defer To English Court Pursuant To Exclusive Jurisdiction Clauses In Some Circumstances If "No-Deal" Brexit

Last Updated: 30 July 2019
Article by Anna Pertoldi, Maura McIntosh and Jan O'Neill

The post below was first published on our Litigation blog

The High Court has held that there is no power under the recast Brussels Regulation to stay English proceedings against an English domiciled defendant in favour of proceedings in a non-EU court commenced pursuant to an exclusive jurisdiction agreement in favour of that court, unless the foreign proceedings were commenced before the English proceedings: Gulf International Bank BSC v Aldwood [2019] EWHC 1666 (QB).

In a number of High Court cases decided under the Brussels I Regulation, which preceded the recast Brussels Regulation, the court held that the English court had a power to stay in favour of a non-EU court in some circumstances, including where there was an exclusive foreign jurisdiction clause in favour of the foreign court (see our posts here and here). This was on the basis that the provisions in the Brussel I Regulation could be applied by analogy, or reflexively. In other words, as an EU court had to stay its proceedings in favour of another EU court where there was an exclusive jurisdiction court in the other court's favour, the same should apply where the chosen court was in a non-EU country.

The recast Brussels Regulation introduced new express powers in articles 33 and 34 giving an EU court the discretion to stay its proceedings in favour of identical or related proceedings in a non-EU country where the foreign proceedings were first in time. That left open the question what powers, if any, the court had where the foreign proceedings were second in time but there was an exclusive jurisdiction clause in favour of the foreign court.

The High Court has now held that there is no power to stay outside of the express provisions of articles 33 and 34 of the recast Brussels Regulation. The court commented that some aspects of reflexive effect have been incorporated into the recast Regulation; finding that there is a discretionary power outside of these provisions would conflict with the principles underpinning the interpretation of the Regulation, such as legal certainty and predictability.

This is a first instance decision, and it would not have been necessary for the judge to decide the point as he found the jurisdiction clause to be non-exclusive rather than exclusive. However, the decision potentially casts doubt on the effectiveness of English exclusive jurisdiction clauses in the event of a "no-deal" Brexit where proceedings are commenced first in an EU member state court and where the Hague Convention on Choice of Court Agreements 2005 is found not to apply – either because the clause was agreed before the Convention came into force for the UK (whether that is taken to be 1 October 2015, or 1 November 2019 when the UK is due to rejoin the Convention in its own right – see this post) or because of the domicile of the parties (if for example all parties are EU-domiciled, the rules in the recast Brussels Regulation will take precedence over the Convention for jurisdiction purposes). In those circumstances, if the approach taken in the present case is correct, an EU27 court  will only be able to stay proceedings commenced in breach of an English exclusive jurisdiction clause where the English proceedings were commenced first in time.

It is also worth noting that the decision is consistent with the High Court judgment in UCP Plc v Nectrus Ltd [2018] EWHC 380 (Comm) (considered in this post), which similarly found – though in a very different context and without such a detailed analysis of the arguments relating to reflexive effect – that the court's powers to stay proceedings in favour of a non-EU court under articles 33 and 34 are exhaustive.

Background

Proceedings were commenced against Mr Aldwood by the claimant bank under a personal guarantee seeking payment of approximately £29 million. He sought to set aside the proceedings on a number of grounds, including that the English court had a discretion to stay its proceedings as the guarantee provided for the exclusive jurisdiction of a Saudi Arabian Committee for Settlement of Banking Disputes ("SAMA").

Decision

The judge, Deputy High Court Judge John Kimbell QC, held that the court did not have a discretionary power to stay the English proceedings, given that Mr Aldwood was domiciled in England so the English court had jurisdiction under article 4(1) of the recast Brussels Regulation.

The correct approach, according to the deputy judge, was to interpret the recast Regulation in accordance with the well-established autonomous European law principles of construction, apply the decisions of the court that were binding on him, and consider previous first instance decisions under previous incarnations of the Regulation.

Interpretation of the recast Regulation

It was settled law that the recast Regulation must be interpreted purposively or teleologically and in accordance with the general principles underpinning the Regulation. Those principles include:

  • Legal certainty and predictability
  • Effectiveness (rules of national procedure cannot undermine the application and effect of the Regulation)
  • Exceptions to a general rule (such as domicile) must be construed narrowly
  • Continuity (interpretation of previous incarnations of the Regulation should continue unless plain that a change of wording was meant to produce a different outcome)

The deputy judge considered that the wording of the regulation gave a strong indication that the terms of the Regulation alone govern jurisdiction for defendants domiciled in the EU and any exceptions must be found in Regulation or not at all.

So far as the new articles 33 and 34 are concerned, in applying its power to stay proceedings a court may take into account a very wide range of factors including the existence of a jurisdiction agreement in favour of the third state, or facts which would have founded exclusive jurisdiction if the third state had been an EU member state. It was therefore clear that some aspects of reflexive effect have now been incorporated into the Regulation itself.

As a result of the inclusion of articles 33 and 34 it cannot be said of the recast Regulation that it is concerned only with regulation of the jurisdiction between the courts of member states, or that it fails to provide a mechanism to give effect to jurisdiction agreements in favour of countries outside the EU. It plainly now does both. Finding that there remained a discretionary power to stay would therefore conflict with the first three principles underpinning the interpretation of the regulation.

Owusu v Jackson C-281/02 [2005] QB 801

So far as binding decisions were concerned, the deputy judge considered the decision in Owusu (considered here) in some detail, finding that it decided that jurisdiction based on domicile is mandatory and subject only to the terms of the Regulation itself (express or implied). Owusu applied regardless of the grounds on which the other court was said to be more appropriate, so including where there was an exclusive jurisdiction clause in its favour. The decision was binding on him, and while it had been the subject of a great deal of criticism, it had been expressly approved recently in the Court of Appeal and Supreme court.

Coreck Maritime GmbH v Handelsveem BV C-387/98

The deputy judge rejected the argument that the decision of the CJEU in Coreck, which preceded Owusu, should be interpreted as not precluding a discretionary power to stay in favour of non-member states in some circumstances. This interpretation, initially put forward by Professor Briggs, had been accepted by Andrew Smith J in Ferrexpo AG v Gilson Investments Ltd [2012] EWJC 721 (Comm) (considered here).

The deputy judge's view was that the paragraphs relied on in Coreck merely dealt with how to assess the validity of a choice of court clause in favour of a non-contracting state. The case did not need to consider on its facts, nor had it considered, what effect which should be given to such a  clause once that exercise had been carried out.

English case law under the Brussels Convention and the Brussels I Regulation

So far as the previous decisions giving reflexive effect were concerned, the deputy judge was not persuaded to take a different view in light of them as:

  • None of them were considering the recast Regulation.
  • The case law wasn't consistent.
  • The cases took an overly restrictive approach to Owusu, which wasn't permissible in light of the recent Supreme Court consideration of Owusu.
  • Coreck had been given an inappropriately wide interpretation.
  • The reasoning based on reflexive effect had been overtaken by incorporation of reflexive effect into articles 33 and 34 of the recast Brussels Regulation.
  • Allowing a parallel discretionary power would undermine the effectiveness of the recast Regulation and contradict the principle of interpreting exceptions to jurisdiction based on domicile restrictively.
  • A contrary finding would undermine certainty and predictability of outcome by adding a secondary discretionary layer whose content would vary from member state to member state.
  • While Dicey and Morris on the Conflict of Laws had tentatively concluded that the previous case law on reflexive effect still applied to the recast Brussels Regulation, other academics, for example Professor Hartley, had taken a different view.

Jurisdiction clause in this case

If he was wrong in his interpretation of the recast Brussels Regulation and the court had a discretion to stay its proceedings, the deputy judge would not have exercised that discretion as he concluded that the clause in this case was non-exclusive rather than exclusive.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions